We started taking a small monthly withdrawal from one of our IRA’s. How do I record this in Tiller’s monthly budget? It will show as income but not sure of the category to place it?
Welcome to the Tiller community, @hall.thomas.e.
If you’re tracking both the IRA and the banking account in Tiller (i.e. both accounts are linked), I would use the Transfer category because you are just moving money between accounts (i.e. there is no new income). If, on the other hand, the IRA is not linked to Tiller, then I would probably create a category within the Income Type for IRA or retirement account income.
Randy
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Thanks Randy, that helps! The IRA account is linked via the “Net Worth Tracker”. Randy, could I still Transfer the funds if it is tied to the New Worth Tracker?? Otherwise, as you suggested I can simply create an income type for IRA/retirement.
Thanks for your time and help!
Hi @hall.thomas.e,
I’ve included our official help guide on using the Transfer category that outlines what @randy means here.
If you have both accounts linked to the same sheet so you see the outflow from the IRA to your checking account then you’d want to count that as a transfer. Does that help?
Heather
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@hall.thomas.e, @randy, @heather
Hey, I think we need to slow down here for a second.
Putting aside spreadsheets for a moment, assuming that IRA is a traditional IRA, and I suspect it is, then it most likely is taxable to some degree, maybe close to 100%. The IRA custodian is required to report the taxable portion as income to the IRS and the IRA owner then reports the income on his tax return. If the owner does not, then the IRS will send him a matching notice. Whether this is a RMD or not does not impact the answer.
So, when the IRA money comes into your checking account, a certain piece of it is taxable and should be recorded in your Tiller sheet as such. This is always the answer regardless of which accounts are linked or not linked. What you do with any nontaxable portion is a discussion for another day.
If the IRA is linked to Tiller, I would record the distribution out of the IRA (to the checking account) as a Transfer. This is an example of a instance where there will not be an offsetting Transfer somewhere else in your Tiller sheet.
Here are a few articles from reputable websites summarizing the IRA distribution rules.
Cheers,
Blake
You rock, @Blake! Thanks for your knowledge.
When we get money paid out from our previously untaxed accounts–there are usually 3 separate lines generated that will appear in the transaction flow for the account–
line 1) Fed Tax withheld…
line 2) State Tax withheld
line 3out) Normal Distr Partial (or something similar indicating money being distributed)–this is the part of the RMD we get to keep more or less (i.e., the post tax amount) that will then appear in the account where we transfer it (the post tax account)
And then the post tax account will have a single transaction line
3tin) showing the
same amount as line 3out) above.
We are new to tiller and trying to set this up properly so we can do two things–track are money on hand and also figure out how much rmd we have accrued during a certain time period. So we think that maybe we should categorie line 3out as transfer
and also line 3in–which balances it as Transfer rmd and hide both but have a tag for line 3in.
It seems like it should be easy to see how the amount in our pretax accounts changes over time as
tiller displays balances but we would like to see what is happening with the rmd as it is a sort of pseudo income that appears in the same accounts (checking and/or savings and/or investment) as other funds we have.
I don’t think that we really need to study the irs rules. The accountants at the institutions where pre-tax rollover ira or 401k or 403b accounts are held are supposed to do this and we need merely request that taxes be withheld appropriately.
The more confusing aspect is that in some cases there seem to be multiple transactions that occur within the pre-tax holding account as money is moved around in order for them to make the distribution following all of their internal rules about investment accounts etc. Is is ok that there will be several apparent transfers within the same institution and we just classify them all as transfer and hide them and ignore them. They don’t necessarily seem to balance for reasons that are not clear to us but they have clear regular patterns. Could you comment on this
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Hi Carol, welcome to the community! It sounds like you have RMDs and want to track and categorize the transfers, tax withholding, and balance changes over time. Tiller provides several options depending on the level of detail and effort you want. I have a couple of questions before making a recommendation.
- Do you use Tiller for budgeting and monitoring your cash flow, and would you go to the level of budgeting your income from investment distributions?
- Do you want to track tax deductions, or simply hide them?
- Sounds like you’re familiar with Tags. Do you use the Tags Report and/or Transaction Tracker?
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I’ll give you example approaches, “simple” and “thorough”, knowing you’ll likely go somewhere in between. 
Simple Method:
- Federal and State Tax Withholding (Lines 1 & 2): Categorize these as “Transfer” (Transfer category type, which is hidden), and add an RMD tag for tracking.
- Net Distribution (Line 3out Pre-Tax Acct): Categorize as “Transfer” and a description of “RMD Net”.
- Post-Tax Account (Line 3tin): Categorize as “Investment Income” (Income category type) and a description of “RMD Net”. Add an RMD tag so you can distinguish this as RMD income.
For the other miscellaneous transactions that you described, you can categorize “Transfer” to hide them, and I would not use a tag.
Thorough Method:
Categorize Transactions:
- Federal and State Tax Withholding (Lines 1 & 2): Categorize these as “Federal Tax” and “State Tax” (Expense category type). This will let you track how much tax was withheld from your RMDs over time.
- Net Distribution (Line 3out Pre-Tax Acct): Categorize as “Transfer Out” (Transfer category type) and a description of “RMD Net”.
- Post-Tax Account (Line 3tin): Categorize as “Transfer In” (Transfer category type) and a description of “RMD Net”.
- Gross Distribution (Post-Tax Account): Enter a Manual Transaction with a description of “RMD Gross” and a category of “RMD Income” (Income category type). We need this total distribution amount before taxes to offset the tax expenses: gross distribution - deductions = net income from your RMD.
Track RMDs Over Time:
• Use the “Tags” feature to tag RMD-related transactions (e.g., federal withholding, state withholding, the 3 transfers in pre and post-tax accounts, but not the miscellaneous transactions you mentioned in the pre-tax account). Then, you can run a “Tags Report” or “Transaction Tracker” in Tiller to see all RMD activity for a specific period.
- Monitor Account Balances:
• Use Tiller’s Net Worth sheet to track how the balance of your pre-tax and post-tax accounts fluctuate over time. You won’t be able to distinguish only impacts from RMDs, but you’ll get a general idea of balance shifts from retirement and bank accounts.
- Other miscellaneous transactions:
• If the internal movements in the pre-tax account don’t seem to balance perfectly, it’s likely due to timing or operational rules of the financial institution. As long as the final amounts (RMD net distributions and taxes) reconcile with your statements, I think you can ignore these intermediate transactions.
Hopefully this helps give you some ideas for tracking RMDs to whatever level of detail fits your needs. And please reach out to the Community if you need help!
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thanks. that’s the type of approach we wanted examples of
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